JAKARTA, RAKYAT NEWS – PT Manulife Aset Manajemen Indonesia (MAMI) Chief Economist and Investment Strategist Katarina Setiawan highlighted that the stability of the rupiah will be crucial in reversing investor sentiment towards Indonesia’s capital markets.

During the MAMI Market Update: Wind of Change event in Jakarta on August 14, 2024, Setiawan projected that the rupiah will trade between Rp15,400 and Rp16,000 per US dollar by year-end. She attributed this stability to positive market expectations of a potential Federal Reserve interest rate cut in the US.

“The Fed’s shift in expectations in July has eased pressure on the rupiah, leading to a rebound in foreign investor purchases in both the stock and bond markets after three months of net sales,” Setiawan explained.

She noted that the reduced pressure on the rupiah is also reflected in the declining average yield on Bank Indonesia’s Rupiah Securities (SRBI). The return of foreign capital to the domestic market could support Bank Indonesia (BI) in considering a rate cut.

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She pointed out that a rate cut is needed given the weakening domestic consumption, despite inflation falling below target ranges. However, she expects BI’s rate cuts to be more conservative compared to the Fed’s, to maintain the interest rate differential and stabilize the rupiah.

“Market expectations are for the BI rate to decrease by 100 basis points and the Fed rate to drop by 150 basis points by the end of 2025,” she said.

Despite these positive signs, she advised investors to remain cautious of potential risks, including sudden geopolitical tensions, US recession risks, and the impact of domestic fiscal policies from the new government. (Uki Ruknuddin)